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Soybeans:

March soybeans advanced 0.50 cents on volume of 140,863 contracts. Total open interest increased by a massive 5,695 contracts, which relative to volume is approximately 55% above average. The January contract accounted for loss of 1,205 of open interest, which makes the total open interest increased more impressive (neutral).

There was a major battle between buyers and sellers in yesterday’s trading and neither side was able to move the market much by the close. Despite the move to 10.61, March soybeans were unable to make a low above OIA’s key pivot point. As this report is being compiled on January 8, March soybeans have made a fractional new high at 10.62, but has made a low of 10.47, which is below OIA’s key pivot point for January 8 of 10.49 3/4. In order for March soybeans to continue to advance, it must make a daily low above the pivot point. March soybeans generated a short-term sell signal on January 2 and remains on a short and intermediate term sell signal. Stand aside.

Soybean meal:

March soybean meal lost $1.10 on volume of 52,895 contracts. Total open interest declined by 1,296 contracts, which relative to volume is average. The January contract accounted for loss of 954 of open interest, March 2015 -2540. Yesterday, March soybean meal made a daily low of 351.10 and as this report is being compiled on January 8, March soybean meal has made another low of 346.80, which is the lowest print since 340.10 made on January 5. This has been the low for the move thus far.

In the January 5 report, OIA recommended that clients initiate bearish positions in March soybean meal and for futures traders to use the penetration of the January 6 high of 358.00 to exit. The market has been unable to breach the 358.00 exit point and clients should maintain bearish positions. Soybean meal is displaying an unusual degree of weakness.A test of the January 5 low is inevitable. On January 2, March soybean meal generated a short-term sell signal, but remains on an intermediate term buy signal.

Soybean oil:

March soybean oil advanced 29 points on volume of 76,480 contracts. Total open interest increased by a massive 5,207 contracts, which relative to volume is approximately 170% above average meaning that aggressive new buyers were entering soybean oil and driving prices to a new high for the move (33.50).The January contract accounted for loss of 323 of open interest.

As this report is being compiled on January 8, March soybean oil is trading 51 points higher and has made a new high for the move of 33.92, and a low of 33.15, which is below OIA’s key pivot point for an intermediate term buy signal for January 8 of 33.43. On January 6, March soybean oil generated a short-term buy signal, and we think the market is moving higher in response to higher palm oil prices, not bullish soybean oil fundamentals. After the generation of a buy signal, the market has a tendency to pullback from 1-3 days and we expect to see a pullback in soybean oil shortly. In our view, clients should stand aside in this market.

Corn:

March corn lost 8.75 cents on volume of 189,413 contracts. Volume fell from January 6 when March corn lost 1.00 cent on volume of 208,680 contracts and total open interest increased by 4,816 contracts.On January 7, total open interest increased by a sizable 7,125 contracts, which relative to volume is approximately 50% above average meaning that aggressive new short sellers were entering the market in heavy numbers and driving prices lower.

The open interest action combined with the light volume is potentially problematic for anyone long the corn market. It confirms a pattern of longs refusing to liquidate as prices move lower. According to the Latest COT report, managed money is long corn by ratio of 4.50:1, which is a sizable long position going into a major report. As we said in yesterday’s report, the continuing build of open interest is potentially explosive when the January 12 USDA report is released.

We advise against being long or short going into the report. The corn volatility index is trading at the high-end of its six-month range. This means that market participants are expecting major fireworks. March corn remains on a short and intermediate term buy signal.

Chicago wheat:

March Chicago wheat lost 12.25 cents on volume of 63,480 contracts. Total open interest increased by 1,014 contracts, which relative to volume is approximately 35% less than average. The May 2015 contract lost 629 of open interest. As this report is being compiled on March Chicago wheat is trading 10.50 cents lower and has made a daily low of 5.66 1/4, which is the lowest print since 5.70 1/4 made on December 1. On January 2, March Chicago wheat generated a short-term sell signal and for an intermediate term sell signal to be generated, the high of the day must be below OIA’s key pivot point for January 8 of 5.49 3/4.As we said in prior reports, Chicago wheat should be traded from the bearish side, however, unless positions show substantial profits on January 12, clients should exit positions.

Live cattle:

February live cattle closed unchanged on volume of 57,138 contracts. Total open interest increased by 1,848 contracts, which relative to volume is approximately 30% above average meaning that battle ensued between buyers and sellers and neither side was able to move the market by the close.

As this report is being compiled on January 8, February live cattle is trading 2.10 cents lower and has made a daily low of 1.63675, which is below OIA’s key pivot point for an intermediate term buy signal. February live cattle and has made a daily high of 1.66975, which is a fractional new high for the move that takes out the previous high of 1.66875 made on January 5.

Although we think there is a reasonably good chance that cattle will advance on a seasonal basis, the fact remains that it has been unable to make a low above OIA’s key pivot point, which for January 8 is 1.66170.The market has made highs above the pivot point, but is unable to make lows above the pivot point, which is key. Stand aside.

WTI crude oil:

February WTI crude oil advanced 72 cents on huge volume of 926,649 contracts. Although volume was very heavy, it was below the high of January 6 when WTI lost $2.11 on volume of 971,334 contracts and total open interest increased by 19,412 contracts.

On January 7, remarkably, open interest actually increased , by 2,269 contracts, which is minuscule and dramatically below average . However, the February contract lost 19,363 of open interest, which makes the total open interest increase more impressive (potentially bullish short-term).The fact that open interest increased on the modest advance tells us there is a lot of bottom picking going on in the market, and this is hazardous to one’s financial health. We think WTI prices are headed lower, perhaps significantly so and don’t expect to see the possibility of a major bottom for at least another 30 to 60 days.Stand aside.

Natural gas:

February natural gas lost 6.7 cents on volume of 343,371 contracts. Volume was the strongest since December 27 when natural gas lost 32.0 cents on volume of 460,677 contracts and total open interest declined by 2,887 contracts. On January 7, total open interest increased by 7,873 contracts, which relative to volume is approximately 10% below average, however the February contract lost 6,064 of open interest, which makes the total open interest increase more impressive (bearish).

As this report is being compiled on January 8,  February natural gas is advancing 5.5 cents, which is a feeble attempt at a rally despite significantly colder temperatures throughout the Midwest and East. This underscores the magnitude of the bear market in natural gas. Stand aside.

The Energy Information Administration announced that working gas in storage was 3,089 Bcf as of Friday, January 2, 2015, according to EIA estimates. This represents a net decline of 131 Bcf from the previous week. Stocks were 250 Bcf higher than last year at this time and 67 Bcf below the 5-year average of 3,156 Bcf. In the East Region, stocks were 36 Bcf below the 5-year average following net withdrawals of 65 Bcf. Stocks in the Producing Region were 24 Bcf below the 5-year average of 1,090 Bcf after a net withdrawal of 33 Bcf. Stocks in the West Region were 7 Bcf below the 5-year average after a net drawdown of 33 Bcf. At 3,089 Bcf, total working gas is within the 5-year historical range.

Gold:

February gold lost $7.90 on volume of 130,128 contracts. Total open interest declined by 1,136 contracts, which relative to volume is approximately 60% below average. The February contract lost 3,435 of open interest. As this report is being compiled on January 8, February gold is trading $1.80 lower and is made a daily high of 1216.80, which is below yesterday’s high of 1219.40 and the high of January 6 (1223.30).

In order for gold to continue its advance, not only does it have to make lows above OIA key pivot points, it must continue to make new highs. Gold is struggling despite its relatively stable performance in the face of a significantly rising dollar and collapsing petroleum prices. February gold remains on a short-term buy signal, but an intermediate term sell signal. Stand aside.

Cocoa:

March cocoa advanced $10.00 on volume of 17,257 contracts. Total open interest increased by 1,385 contracts, which relative to volume is approximately 230% above average meaning a battle ensued between buyers and sellers and buyers had the edge. As this report is being compiled on January 8, March cocoa’s closed at 2986, up $74.00.

The real test for cocoa will come tomorrow. For the rally to continue March cocoa must make a daily low above OIA’s key pivot point for January 8 of 2957. On December 8, March Cocoa generated a short-term buy signal, and remains on an intermediate term sell signal. For an intermediate term buy signal to be generated, the low of the day must be above OIA’s key pivot point for January 8 of 2990. In the December 31 report, we advised clients to exit positions and move to the sidelines. 

Coffee:

March coffee advanced 15 ticks on heavy volume of 40,107 contracts.Volume was the strongest since November 18 when 40,025 contracts were traded and March coffee closed at 1.9290. On January 7, total open interest increased by a massive 3,026 contracts, which relative to volume is approximately 190% above average to meaning huge numbers of buyers and sellers entered the market, but by the close neither side was able to move the market beyond a fractional gain.

As this report is being compiled on January 8, March coffee has closed at 1.7690. In order for March coffee to generate a short-term buy signal, the low the day must be above OIA’s key pivot point for January 8 of 1.7695. Until this occurs, stand aside.